Central America Food and Drink Report 2010

Date: January 22, 2011
Pages: 59
US$ 1,175.00
Report type: Strategic Report
Delivery: E-mail Delivery (PDF), Download
ID: CB388261FD9EN

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The Central American food and drink sector has continued to attract significant investment over the lastthree months. In perhaps the most significcant announcement, Mexican soft drinks producer Coca-ColaFemsa revealed that it had signed a preliminary agreement to acquire Panama-based diary companyGrupo Industrias Láctea, which we think highlights the strong growth prospects for the region’s dairysector. Soft drinks were also a target for investment during the quarter, with Mexico-basedEmbotelladoras Arca, revealing that it is to expand into Ecuador, through the creation of a joint venturewith local operator Ecuador Bottling Operator (ECB). These two announcements come shortly after theworld’s largest food firm Nestlé announced it is to become the majority shareholder in the GuatemalabasedMahler Group. This significant investment activity chimes well with our optimistic outlook forconsumption in the region.

Headline Industry Data (Regional Averages)
  • 2011 per capita food consumption (local currency) = +7%; forecast to 2015 = +49.1%
  • 2011 alcoholic drink sales (litres) = +6.3%; forecast to 2015 = +33.5%
  • 2011 soft drink sales (litres) = +6.2% ; forecast to 2015 = +32.0%
  • 2011 mass grocery retail sales (local currency) = +6.6%; forecast to 2015 = +46.6%

Key Company TrendsConsolidation in soft drinks – Consolidation in the region’s high growth soft drink sector has continuedin 2010 with Mexico's second largest Coca-Cola bottler, Embotelladoras Arca, revealing its joint venturewith Ecuador Bottling Operator (ECB). Arca will combine its Argentine operations with ECB and take a75% stake in the new business in exchange for about US$345mn. The move will allow Arca continue itsexpansion outside of the maturing Mexican market and, given the relatively unsaturated nature of theEcuadorian soft drinks sector, it offers the potential for stronger sales and earnings growth.

Femsa investing in dairy – In October 2010, Mexico-based Coca-Cola Femsa signed a preliminaryagreement to acquire Panama-based diary company Grupo Industrias Láctea. The move represents asignificant departure for the soft drink firm and will have been driven by the high growth rates in theLatin American dairy sector. Given Femsa's increasing dominance of the Latin American soft drink sectorwe believe this could be the start of a significant programme of sideways expansion into the immature,but attractive Latin American dairy field.

Key Risks to OutlookUS Slowdown – Central America is gradually reducing reliance on its US trade ties, exemplified by thesigning of a liberal trade agreement with the EU in late May 2010. However, the US remains the region’smajor trade partner absorbing 41% of its total exports.

Political Risk –this is also a significant factor for some Central American markets. Failure to addressstructural and institutional shortcomings could see the region struggle to attract new investors – a processwe see as key to the continued development of the consumer sector.
Executive Summary
SWOT Analysis
Central America Food Industry SWOT
Central America Drink Industry SWOT
Central America Mass Grocery Retail Industry SWOT
Business Environment
BMI’s Core Global Industry Views
BMI Food & Drink Core Views
Macroeconomic Outlooks
Guatemala Economic Outlook
  Table: Guatemala - Economic Activity
El Salvador Economic Outlook
  Table: El Salvador - Economic Activity
Honduras Economic Outlook
  Table: Honduras - Economic Activity
Costa Rica Economic Outlook
  Table: Costa Rica – Economic Activity
Industry Forecast Scenario
Consumer Outlook
Total Food Consumption
  Table: Guatemala Food Consumption
  Table: El Salvador Food Consumption
  Table: Costa Rica Food Consumption
  Table: Honduras Food Consumption
Hot Drinks
  Table: Central America Coffee Sales
Alcoholic Drinks
  Table: Central America Alcohol Sales
Soft Drinks And Bottled Water
  Table: Central America Soft Drink Sales
Mass Grocery Retail
  Table: Sales Breakdown By Retail Format (%)
  Table: Guatemala Mass Grocery Retail Sales
  Table: El Salavdor Mass Grocery Retail Sales
  Table: Costa Rica Mass Grocery Retail Sales
  Table: Honduras Mass Grocery Retail Sales
  Table: Central America Food And Drink Trade Balance
Key Company Trends and Developments
Femsa Attracted To Central American Dairy
Nestle Makes Guatemalan Acquisition
Wal-Mart Giving Producers a Hand
Market Overview
Key Company Trends and Developments
Regional Consolidation In Soft Drinks
Increased Competition In Brewing Sector
Market Overview
Hot Drinks
Soft Drinks
Alcoholic Drinks
Mass Grocery Retail
Key Company Trends and Developments
Investing In Expansion
Market Overview
Competitive Landscape
  Table: Key Players in the Central Americas's Food & Drink Sector
  Table: Key Players in Guatemala's Mass Grocery Retail Sector 2009
  Table: Key Players in El Salvador's Mass Grocery Retail Sector 2009
  Table: Key Players in Costa Rica's Mass Grocery Retail Sector 2009
  Table: Key Players in Honduras' Mass Grocery Retail Sector 2009
Company Profiles
Diana Food
Central America Beverage Corporation
Mass Grocery Retail
Wal-Mart Central America
BMI Methodology
How We Generate Our Industry Forecasts
BMI Food & Drink Industry Glossary
Food & Drink
Mass Grocery Retail
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